Does Whistleblowing Pay? New Study Says Yes!

Jaron H. Wilde, assistant professor of Accounting, University of Iowa. Photo credit: University of Iowa.

There’s a high cost to being a whistleblower. As my Bank Whistleblowers United colleagues and I can attest to, being a whistleblower means losing your job and most future possibilities of getting another position in your profession are slim to none; not to mention the human cost of the stress and emotion involved and the personal financial debacle that comes along with this decision.

While Sarbanes-Oxley supposedly protects whistleblowers from retaliation, the facts prove different. So it is an end of year gift to discover that whistleblowing is actually demonstrating results, a real return on the investment.

New research by JaronH. Wilde, an assistantprofessor of accounting at the University of Iowa’s, Tippie College of Business, “demonstratesfor the first time that financialshenanigans at companies decrease markedly in theyears aftertruth tellerscome forward with information about wrongdoing in their operations.”

The new research, which will be published shortly in Accounting Review, has disclosed a “sharp and lasting drop in in financial wrongdoing at companies that were subject to whistle-blower investigations.”

In 2016, the whistleblower program at the S.E.C.,which was established under the Dodd-Frank Act of 2010, heard from 4,218 “tipsters,” a 40% increase from 2012. This is a dramatic increase from 2008, when as reported in the Wall Street Journal, the Department of Labor had ruled in favor of whistleblowers in only 17 of 1,273 complaints filed under the Sarbanes-Oxley Actsince it was enacted in 2002.

The research shows that that the S.E.C. program has awarded $136 million to 37 whistleblowers since its program’s inception and the enforcement actions have resulted in almost $900 million in financial remedies, which went primarily to wronged investors.

Mr. Wilde’s research involving whistleblowing under the Sarbanes-Oxley Act, which spans from 2003 to 2010,includes 317 U.S. public companies. He says, “following the allegations whistleblower firms are significantly more likely to experience a decrease in the incidence of accounting irregularities and a decrease in tax aggressiveness, compared with control firms.” Based on the data he had accumulated to date, the decrease lasted for at least a two-year period.

While skeptics have questioned whistleblowers’ motivations and the merits of complaints, the study shows that there were “certainly a number of instances where whistle-blowers are providing incremental information that allows the government to have a case against a company or an employee.” As Mr. Wilde says, “the organizational complexity of companies is now so high that it makes it difficult for external parties to detect misconduct. These individuals coming forward are what allow the government to have a case in many instances.”

Credit: U.S. SEC Office of the Whistleblower – The U.S. Securities and Exchange Commission (SEC), The Office of the Whistleblower

Granted, the study may have its limitations. Still, new cases of whistleblowing are calling attention to the illegal practices of retaliation some companies and, yes, even our government, has engaged in.

A recent case in point is that of National Security Agency inspector, George Ellard. It appears that Mr. Ellard, an outspoken critic of whistleblower Edward Snowden, personally retaliated against another NSA whistleblower.

Mr. Ellard received a termination notice.Jesselyn Radack, a whistleblower attorney who has represented multiple NSA whistleblowers, including Snowden and Thomas Drake, is quoted … “Ellard’s proposed termination for whistleblower retaliation confirms what the whistleblowing community has long known: there were no safe and effective internal channels for NSA whistleblowers like Snowden to use. The case for pardoning Snowden is made stronger given Ellard’s now proven record of retaliation.”…“This is a man, who runs an office that is supposed to protect whistleblowers, yet he described them as manic thieves and other such terminology and was quite hostile and intimidating.”

Another case is the Wells Fargo situation where employees came forth to report on retail banking practices that enrolled customers in services they did not ask for or want.Employees who spoke out paid dearly for trying to do the right thing: they were fired!

CNNMoney is hearing from former Wells Fargo workers around the country who tried to put a stop to these illegal tactics. The case is still under investigation and is finally getting the attention it deserves on the side of whistleblowers.

Dozens of Wells Fargo employees filed retaliation complaints with a federal whistleblower program since 2010. And the data reveals that not only did the bank know about widespread complaints, but the government did, too!

So perhaps change is coming and this report will have some traction, encouraging truth tellers to come forward, and stopping the massive retaliation practices, which, though against the law, continue to be used.

If companies can see that preventing whistleblowing and doing the right thing has a return on investment, we may finally gain traction in stopping the massive fraud that almost crippled this country.

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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

What People Are Saying About Richard M. Bowen

"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author

2017-06-30T10:08:59+00:00

"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author

http://www.richardmbowen.com/testimonials/2556/

"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual

2015-02-13T19:51:19+00:00

"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual

http://www.richardmbowen.com/testimonials/711/

"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator

2015-02-13T19:50:26+00:00

"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator

http://www.richardmbowen.com/testimonials/712/

"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving. The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving. The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International

http://www.richardmbowen.com/testimonials/532/

"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program

2014-12-28T19:48:06+00:00

"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program

http://www.richardmbowen.com/testimonials/533/

"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International

2014-12-28T19:47:50+00:00

"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International

http://www.richardmbowen.com/testimonials/531/

"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's

2014-12-28T19:47:22+00:00

"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's